Temporary 1 Percent Sales Tax Increase Goes Into Effect

Lara Brucker/Staff

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Although UC Berkeley sophomore Alex Stabler has been careful about how she spends her money, she decided to buy a skirt from American Apparel on Telegraph Avenue before the statewide sales tax increase hits today.

"What I'm buying is what I had been thinking of getting," she said.

Despite her last-minute splurge Tuesday, Stabler said the 1 percent sales tax increase will not change her spending habits-conscientious, yet willing to buy what she needs.

Wednesday marks the first major statewide sales tax increase since 1991, but city and state officials do not expect current consumer spending to decline drastically as a result.

The temporary increase raises the average state sales tax from 8 to 9 percent, according to Paul Warren, principle analyst for the state Legislative Analyst's Office.

Sales tax is now 9.75 percent for Alameda County and 9.5 percent in San Francisco County. Pico Rivera and South Gate in Los Angeles County face a 10.25 percent sales tax, the highest in the state.

Despite significant drops in tax revenues as a result of the recession, the increased sales tax is expected to generate $5.8 billion over the next 15 months for California, Warren said.

The temporary increase expires on July 1, 2011, but can be extended an additional year if voters approve Proposition 1A, also known as the Budget Stabilization Act, in the May 19 statewide election, Warren said.

The increase in sales tax was part of several tax increases passed in the February state budget to balance the $40 billion shortfall the state is slated to face in the coming two years.

The sales tax revenue will go into the state's general fund, which funds a variety of activities from health care to higher education.

Berkeley city spokesperson Mary Kay Clunies-Ross said the city does not anticipate a decline in sales from the increased tax.

"The last really significant increase in sales tax we saw was in 1991 and there wasn't a reduction in sales," she said.

Martha Olney, adjunct economics professor at UC Berkeley, said she does not expect the increase will drastically change current consumer spending and that people will still buy necessary items.

"Sales tax is a pretty small percentage of anybody's budget," she said.

In addition, many purchases such as food, housing and services are exempt from sales tax, Olney said.

This exception includes food that is intended to be eaten on the premises of purchase, said Anita Gore, spokesperson for the California State Board of Equalization.

Olgosh Green, waiter at Venus Restaurant on Shattuck Avenue, said he does not think the extra cents on a $20 restaurant bill will drive customers away.

"I think most people are going to think like I do-20 cents, I'm not going to notice that and dammit I'm hungry and I want some ham and eggs,'" he said.


Carol Yur covers city government. Contact her at [email protected]

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